Federal Reserve Notes Structure & Functions

I. Purpose: to keep the economy stable  Goals: high employment, stable prices, economic growth  Enemies: inflation and unemployment (recession)

II. Structure  A. publicly (gov’t) run but privately owned bank; independent within the government  B. run by a 7 member Board of Governors  appointed by the President  14 year terms – to remain apolitical  one member is chosen as chairman – term of 4 years. The current chair = Janet Yellen.

II. Structure (cont.)  C. 12 Federal District Banks – U.S. is divided up into 12 geographic regions each with its own main bank and president to manage that region; Federal Reserve Districts and Banks Federal Reserve Districts and BanksFederal Reserve Districts and Banks  D. Federal Open Market Committee (FOMC) – 12 members advise the Board of Governors on buying and selling gov’t bonds ( a.k.a. securities)

III. Functions  A. Control the Money Supply – our ability to get money to consume/invest FED BANKS ALL OF US

III. Functions (cont.)  B. Supply Paper Money – determines amount to print  C. Hold Bank Reserves – keep the money banks send to their district bank to back up their checking accounts

III. Functions (cont.)  D. Check Clearing Services – handles transfer of money between banks

III. Functions (cont.)  E. Supervise Member Banks – examine banks to see that they are being run properly  F. Lender of Last Resort – bank for banks to get loans from

IV. Usage of the Fed Bank  only a bank for other banks and gov’ts; not a bank for individuals or businesses  Jobs – control $ supply & supervise banks